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Pitfalls when you mine for gold

Some points to consider before you dabble in the yellow metal.

? Even the best economists can make mistakes when trying to read this difficult market. Just ask UK finance minister Gordon Brown, who from 1999 to 2002 led a series of gold auctions by the Bank of England. It seemed like a perfectly good idea at the time. But when you consider that the last auction in March 2002 sold 643,200oz of gold at a mere $296.50/oz, and that at the time of going to press the price is nearer $370/oz, it doesn't look so clever in retrospect. All things being equal, at today's prices that particular auction would have raised over $47 million more than it did: enough for a couple of schools. Let's hope that those central banks that are now buying gold instead of holding dollars are not making a similar mistake and loading up at the top of the market.

? Even gold strategists do not encourage the uninitiated to take a punt in bullion. "I would discourage it," says Merlin Marr-Johnson, a gold strategist at HSBC in London. "The choice of buying gold is a calculated risk based on the rest of the system.

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